taptap send Secures $13.4M Funding for No-Fee Money Transfers

The Growing Importance of Remittances and a New Funding Round

Remittances – funds sent by individuals working in developed nations to family and friends in emerging economies – remain a critical economic force, enabling individuals in challenging financial situations to improve their lives. A startup focused on optimizing this process has recently secured funding to expand its operations.

Taptap Send Secures $13.4 Million in Series A Funding

Taptap Send, a provider of a “free” mobile money transfer service connecting eight countries to fifteen others, has announced a $13.4 million funding round. These funds will be allocated to broadening the platform’s reach and enhancing the services offered to its user base.

The fifteen countries receiving funds include some of the world’s most economically disadvantaged nations, such as DR Congo, Mali, and Madagascar. The eight countries from which funds originate encompass locations with significant emigrant populations from these recipient nations – including the United Kingdom, Belgium, Canada, France, and Italy.

This Series A funding round was jointly led by Canaan Partners and Reid Hoffman, with participation from other undisclosed investors.

Addressing a Niche Market: The Challenges and Opportunities

Many companies initially launch and develop services in affluent countries like the U.S. or Western Europe due to the concentration of wealth and consumer spending power. However, this doesn’t negate the existence of underserved demographics with a need for innovative technology. Developing solutions for these groups can be less profitable and present greater risks.

Taptap Send is actively working to challenge this trend, aiming to deliver on the promise of technology for all. The company’s business model distinguishes itself by not charging commissions or fees on transfers, instead generating revenue through foreign exchange rate margins.

A Tech Stack Built for Efficiency and Lower Costs

Having constructed its entire technology infrastructure from the ground up, Taptap Send asserts that it can offer more favorable exchange rates to its customers compared to competitors serving similar markets. This approach leverages economies of scale: attracting more users through better rates can lead to increased transaction volume and overall returns.

The Founder’s Vision: A History of Impactful Fintech

Taptap Send represents the third entrepreneurial venture for Michael Faye, a development economist with prior experience at the United Nations. Previously, Faye founded GiveDirectly and Segovia, consistently focusing on leveraging financial technology to improve the lives of individuals in emerging markets.

GiveDirectly, still operational, facilitates philanthropic donations by directly transferring funds to recipients via mobile money. Segovia (acquired by Crown Agents Bank) provided a mobile money transfer service via API for other money transfer companies.

Remittances as a Core Focus: C2C Transfers

Taptap Send builds upon Faye’s previous work, concentrating on the substantial market of remittances – specifically, person-to-person (C2C) transfers of funds sent “back home” to support family and friends.

“Taptap Send is capitalizing on the structural shifts in mobile money and distribution networks to provide what we believe is the fastest and most cost-effective service available to our customers,” Faye explained in an interview with TechCrunch.

The Scale of the Remittance Market

The global remittance market is immense, estimated at $540 billion annually through established channels. “Informal” methods, such as individuals physically carrying cash, are estimated to be of comparable size. Remarkably, remittances now exceed foreign direct investment, surpassing state-sponsored aid in 2019, according to the World Bank.

Mitigating Risks and Ensuring Transparency

The rise of mobile technology has simplified sending and receiving money, but it has also created opportunities for exploitation. Users may not fully understand the pricing structure of these services.

To address this, the UN has established a goal of limiting remittance pricing and commissions to a maximum of 3% of the total amount sent, encouraging companies to prioritize volume over high margins. Taptap Send is the only company in the industry to publicly commit to this goal, although it is still working towards consistently achieving it.

Growth and Competition in a Dynamic Market

While the company is not yet disclosing specific figures regarding its size or customer base, Faye reports a fivefold increase in business over the past year and current gross profitability. He also noted that the COVID-19 pandemic accelerated the shift towards digitization.

Despite intense competition from established players like Western Union and MoneyGram, as well as numerous other remittance startups such as Remitly and World Remit, Faye remains optimistic. “The remittance market may appear crowded, but so were video conferencing before Zoom and social networking before Facebook,” he stated.

Investor Confidence and Future Outlook

“The company possesses a well-defined and effective strategy, implemented by Michael, to become the lowest-cost provider in each market it enters,” commented Brendan Dickinson, a general partner at Canaan. “As the world increasingly adopts digital wallets and e-money, remittance companies have an opportunity to create a more seamless experience by directly sending funds to these wallets. Taptap Send maximizes cost savings for the customer, consistently offering the most affordable service. This approach drives significant growth, with over 90% of Taptap Send’s expansion being organic.”